2017 ASSA Annual Meeting

Competitive payment mechanisms are commonly used to promote higher productivity in the workplace. Yet, these types of incentives could reduce workers' willingness to cooperate in subsequent tasks. In this paper, we explore this question by conducting a lab-in-the-field experiment with workers from a low-productivity agrobusiness in rural Ghana. To investigate how prosociality towards a co-worker evolves, we use a between-subjects design where participants complete a real-effort task under a competitive, threshold, or random payment. We measure prosocialty before and after this task through (1) a public goods and (2) a social-value orientation game. We find the effect of competition on changes in prosociality to be context-specific. Competition reduces prosociality when the dispersion of payments is high, an effect that is driven by high earners who win the competition. However, when there is less at stake, competition can increase cooperation. This effect seems to be driven by those who lose the competition. Interestingly, the competitive payment scheme has no significant effect on average effort/output levels. We combine our experimental and survey data with firm-administrative data in order to explore how experiences in and outside of the lab might interact and derive some potential implications for workplace policy.

In this paper, the analysis of Cook (2011) on the effectiveness of financial reforms in Nigeria for the financial system and for the poor is extended with newly available published and survey data. I find that the share of banked adults nearly doubled between 2008 and 2014. In general, financial exclusion has diminished among Nigerian households. However, financial engagement related to productive activity – investment in starting, operating, and expanding businesses and in human capital – has fallen considerably over the period. We observe that this continues a trend starting in the early 1990’s and could constrain economic growth in the short and medium run. In addition, we find that mobile money has not had the significant effect on financial inclusion in Nigeria that its rates of adoption of mobile telephony would suggest nor that the literature has found in Kenya and Tanzania.

We consider a Markov chain framework to study the dynamics of subjective poverty in urban Ethiopia using an unbalanced panel of 1,500 households over a decade. We measure subjective poverty as three points ordinal scales defining three states: rich, borderline and poor. Our framework allows alternative specifications of unobserved heterogeneity as a random effect dependent on: households and poverty departure state, household and transition poverty profile, and household only. We identify both transitory and permanent effects. The preferred specifications involve heterogeneity (existence of frame-of-reference bias). Own consumption have imperfect but strong positive effect on upward transitions. The presence of unemployed household members increases subjective poverty at a given income. We find little evidence of relative deprivation effects on poverty. Human capital is a strong determinant of upward poverty transition. Further, larger households enjoy greater economies of scale, but the structure of a household matters. Having more number of children in the household raises subjective poverty. On the other hand, we find no evidence to support the role of positive income trajectories in rating self-welfare. Households on positive consumption trajectories are not likely to rate their welfare higher, but initial level of poverty is an important determinant of future poverty. Social capital (membership in volunteer institutions) raises the probability of downward mobility of subjective poverty. Finally, the older household head, the lower chance to transit to poor state.

Tax evasion is one of the most pervasive problems confronted by tax authorities across the developing world, particularly in Africa. We analyze a randomized trial of two innovative anti-tax evasion schemes in Ethiopia that signals higher probability of audit and severity of punishment and complimentary messages that encourage tax morale. Our results indicate that the threat of audit reduces tax evasion significantly (over 50%), and its effect is higher in businesses that are deemed to be prone for tax vasion, such as imports and wholesale activities. We also find that appealing to the tax morale promotes compliance, almost comparable to that of audit threat. Either way, efforts on the part of the tax authority to enhance compliance can be effective depending on the type of businesses and preference structure of tax payers. We explore concerns with spillover effects, differences among tax payers- corporate vs self-operated businesses, and nature of business activities. Steps to address these concerns leave the main findings fundamentally unchanged.

The population size of the 54 African states passed the 1 billion mark in 2009 and continues to grow at rate in excess of 2% per year. In the absence of effective and focused measures to slow down the rate of growth through education and family planning including delayed marriage and abstinence, the population is expected to double in 27 years. With the young and relatively more educated migrating to the cities in search of job opportunities and other amenities of life which typically have concentrated in and around the major cities in Africa, the rapid growth of armies of unemployed youths in the urban areas pose a ticking time bomb all around the continent. In the backdrop of these scenarios, the fragmentation of land among the growing rural population and the intense pressure of transnational land transactions (known as land grabbing) expose farmers and urban dwellers to severe food insecurity and livelihood vulnerabilities posing major concerns which African governments have to address sooner than later. The main objective of this paper is to estimate trends in the production efficiency of the agricultural sector over time using data envelopment analysis (DEA) and cross country data in order to assess the state of food security, or insecurity in the continent. In particular, the study will explore the impacts the conventional sources of economic growth such as education, aid for agriculture, infrastructure investment, and governance on the rate agricultural production efficiency. We will analyze crop and cereal, livestock, and overall food production efficiency from 1995 to 2012. Preliminary results suggest that the importance of these control variables in promoting or impeding the productive efficiency of the agricultural sector over time with significant implications for food security in the African continent.

Ghana's population is ageing but the Ghanaian government is not making sufficient efforts to cater for the needs of the elderly. This study proposed the "Old People's Home" as a solution to elderly care and investigated whether it will be viable in Ghana. A 3-pronged strategy was employed: (i) Questionnaires and interviews were administered to 60 potential family caregivers, aged between 25 and 59. (ii) The owner of an existing Old people's home in Accra was interviewed to highlight challenges faced and evaluate the sustainability of such a venture and (iii) financial analyses were conducted to assess the feasibility of a hypothetical Old people's home. Findings indicate majority of the respondents did not want to patronize Old People's Homes as a result of their attitudes, cultural beliefs and general economic hardship. However, the "Old People's Home" may be viable if people's views about care homes change. The financial analysis concluded that the Old People's Home could be sustained as a business as long as there were at least 15 customers under care. However, given the difficulty in attracting customers, and in changing people's views about Old People Homes, the study finds evidence against such a venture in the short term.

As far as the African Union, AU, is concerned, the continent should move, inexorably, towards a peaceful, prosperous and integrated continent. The paper shows why, in part, this goal has either, so far, eluded AU, its constitutive agencies and its member states. The paper faults the [intellectual] minds, as expressed in various communications, including by policy advisers, academicians and politicians alike, on which the movement and behavior of the continent toward a united continent has been built. The paper draws on the Lucas Critique as an expression of time or dynamic inconsistency, as a veritable explanation for the yawning gap between the predictions of models and policy implementation success in Africa. The idea is and in disagreement with the rational choice model, that agent's or decision maker's preferences do change over time and therefore, the optimality conditions or behaviors on which economic integration were constructed, in the first place, are now violated. Evidence is drawn from the efforts of the regional economic communities, RECs, and from the African Union's policy agreements. Further examples are presented from leading research and scholarship and from core policies aimed at bringing about custom or monetary unions. As an illustration, political pressure arising from proto nationalism and external colonial ties often sway member countries to take measures that are different from those agreed upon earlier in the RECs. These would include agreements on common currency, the free movement of people and labor and on free trade. The paper then offers plausible solutions to the observed Lucas Critique and time inconsistency problems in the modeling of African economic integration and African development.

It is widely recognized that structural transformation lies at the heart of economic development of any nation. Recent research suggests that the industrial sector, especially manufacturing, is a key engine of growth in the development process, including that of North Africa. The necessity for structural transformation in North Africa arises from the fact that the sub-region needs high and sustained economic growth in order to make significant progress in generating increased productive and quality jobs and livelihood for its teeming population, especially the youth. Unfortunately, manufacturing development in North Africa has not improved over time. For example, its manufacturing value added (MVA) in world MVA accounted for only 0.10 percent of world MVA in 2013. Also, the share of North African MVA in GDP was just 16.00% in 2013 compared with Asia & Pacific's 25%. This paper empirically assesses the key determinants of manufacturing value added in the sub-region using a time series cross-sectional data set of the countries for the period, 1970 to 2013. Two estimation techniques, the pooled panel OLS regression with year fixed effects and the IV-GMM estimation procedure, were used. We find the following factors exerting significant positive effect on manufacturing added in North Africa: domestic investment, openness of the economy, education, dependence on gas rents, government consumption expenditure, and manufactured exports. There is also a strong support for a non-monotonic, U-shaped relationship, between MVA with economic development. On the other hand, the results indicate that democracy, dependence on oil, mineral and forest rents, level of manufactured imports, higher urbanization, dependence on official development assistance and foreign aid, and civil violence have significant negative effect on MVA in the sub-region. The paper concludes with policy recommendations.

The study aims at quantifying the effects of trade-induced technology imitation (proxied by the share of imports in the "easy imitation" Standardized International Trade Classification (SITC) category) on economic growth in Africa, using a production function approach in a panel system-GMM estimator. Indicators of trade-induced technology imitation have been built on the Standard International Trade Classification (SITC) using raw data from the United Nations’ COMTRADE Statistics. Findings suggest that economic growth tends to be greater in countries with higher ratios of technology imitation conditional to the level of human capital index. Another noticeable finding is that the lower the level of GDP per capita, the higher the growth effects of technology imitation relative to other forms of technology progress.

This paper examines the relative efficiency scores of the healthcare system of the ten regions in Ghana. We apply data envelopment analysis (DEA) and Malmquist Productivity Index (TFPI) using balance panel data from 2000-2014. The resulting TFPI from our study is decomposed to investigate changes in technical efficiency and technological progress components. Our preliminary results indicate that the annual productivity growth averaged 0.093 per cent, and is largely due to positive change in efficiency. Our results in conjunction with national health outcomes data indicate that greater proportion of the DMUs experienced improvement in health outcome from 2001 to 2014 relative to inputs usages.

The paper examines nonlinear effects of monetary policy reaction function using 1978-2015 annual sample with threshold autoregression (TAR) and traditional models to find out how Bank of Ghana (BOG) reacts to achieve its primary goals when inflation rate deepens. Estimating linear functions to capture temporary monetary policy reaction functions to assess reactions of Central Banks' monetary policy, especially in developing countries, often suffer from serial correlation, heteroscedasticity and functional instability problems. We remedied these problems by using interest rate to minimize a quadratic nonlinear loss function to derive an asymmetric TAR model. We then identified logged price as the threshold variable, with one threshold value in a two inflation regimes from designated output and inflation threshold variables, and two threshold values in a three inflation regimes when exchange rate is included in the designated threshold variables. In all inflation regimes, the BOG responds to external account deficits, and in a low inflation regime, it responds to both inflation and output. In the moderate inflation regime, it responds to only output. In the high inflation regime, it responds to only inflation in the two inflation regimes, and to both output and depreciation in the three inflation regimes. Both Engle-Granger and asymmetric error correction estimates indicate that temporary deviations of interest rates from a long-run equilibrium are symmetrical, with the speed of adjustment being fast in the former, and in the latter case, where the negative phase of deviations is persistent and seems to be temporarily asymmetrical. Furthermore, both threshold and Engle-Granger cointegration tests are supported by Johansen cointegration tests. Thus, the symmetric policy response results in both short term and long-run are consistent with the central bank’s public stance of pursuing inflation targeting policy to reduce inflation, even though it is ineffective in moderate and high inflation regimes.

The paper examines nonlinear effects of monetary policy reaction function using 1978-2015 annual sample with threshold autoregression (TAR) and traditional models to find out how Bank of Ghana (BOG) reacts to achieve its primary goals when inflation rate deepens. Estimating linear functions to capture temporary monetary policy reaction functions to assess reactions of Central Banks' monetary policy, especially in developing countries, often suffer from serial correlation, heteroscedasticity and functional instability problems. We remedied these problems by using interest rate to minimize a quadratic nonlinear loss function to derive an asymmetric TAR model. We then identified logged price as the threshold variable, with one threshold value in a two inflation regimes from designated output and inflation threshold variables, and two threshold values in a three inflation regimes when exchange rate is included in the designated threshold variables. In all inflation regimes, the BOG responds to external account deficits, and in a low inflation regime, it responds to both inflation and output. In the moderate inflation regime, it responds to only output. In the high inflation regime, it responds to only inflation in the two inflation regimes, and to both output and depreciation in the three inflation regimes. Both Engle-Granger and asymmetric error correction estimates indicate that temporary deviations of interest rates from a long-run equilibrium are symmetrical, with the speed of adjustment being fast in the former, and in the latter case, where the negative phase of deviations is persistent and seems to be temporarily asymmetrical. Furthermore, both threshold and Engle-Granger cointegration tests are supported by Johansen cointegration tests. Thus, the symmetric policy response results in both short term and long-run are consistent with the central bank’s public stance of pursuing inflation targeting policy to reduce inflation, even though it is ineffective in moderate and high inflation regimes.

The renewable resource character of non-timber forest products (NTFPs) is an opportunity to it sustainability, this study analyzed the role of social capital in the adoption of sustainable management practices of NTFPs by households in the community forest (CF) Morikouali-ye. The analysis shows that 67% of households surveyed perceive the level of degradation of NTFPs in their CF as time passes and are close to 74% for adoption of sustainable management practices of NTFPs that are domestication, sustainable management of the CF, the logging ban trees and uprooting plants, etc. 26% refused to adopt these practices estimate that, at 39% it is better to promote logging in the CF. The estimated probit model shows that social capital through trust, solidarity and social inclusion significantly influences the probability of households to adopt sustainable NTFP management practices. In addition, age, education level and income from the sale of NTFPs have a significant impact on the probability of a doption. The probability of adoption increases with the level of education and confidence among households. So should they be animated by a spirit of solidarity and trust and not let a game of competition for sustainable management of NTFPs in their CF.

Biofortifed foods are being introduced in sub-Saharan Africa as an important strategy to help address micronutrient malnutrition. However, there has been little research on factors that could play decisive roles in their successful introduction. This paper investigates the determinants of consumer acceptance of biofortied orange-fleshed sweet potato (OFSP) using data from a choice experiment conducted in Ghana. I find that OFSP is preferred to traditional white-fleshed and yellow-fleshed sweet potatoes as indicated by consumers' marginal willingness to pay for the three varieties. I also find that respondents' socio-economic characteristics do not have a significant effect on consumer acceptance of OFSP. Conversely, providing consumers with information about the nutritional benefits of OFSP exert a substantial, positive and significant effect on their acceptance of the produce. Providing nutritional information thus appears to be more crucial in the successful introduction of OFSP and other biofortified foods.

This paper attempts at examining the long-run effect of climate change on export revenue of the cocoa industry of Cote d’Ivoire. We apply an autoregressive distributed lag approach using time-series data from 1966-2011 to investigate this phenomenon. The results indicate that precipitation may affect cocoa export revenues in the Ivorian economy. This finding, is in accordance with Jones and Olken (2010) study that supports the notion of the negative effects of precipitation on exports in least developing countries.

This paper examines gender differences in the amount and type of start-up capital and their links with entrepreneurial performance. It uses 2012 UN Swaziland Survey data of entrepreneurs to estimate a probit model with OLS and Quantile regression in a multivariate analysis. The empirical analysis from Swaziland shows that both women and men entrepreneurs with higher start-up capital and those who fund it from the formal financial sector post higher sales than those with smaller capital funded from other sources. Similarly to other African countries, women entrepreneurs in Swaziland have smaller start-up capital and are less likely to finance it from the formal sector than men. Further, women who receive family and professional support tend to start their firms more often with loans from formal sources than women without such support, pointing to a room for policy interventions.